Drug makers on brink of $65bn patent cliff, says report

Pharmaceutical companies will suffer an estimated $65 billion drop in sales over the next five years due to the expiry of patents protecting several leading drugs, according to a UK research and consulting firm.

The expiries, dubbed the ‘patent cliff’, will hit Japanese drug maker Otsuka, US-based company Eli Lilly, and UK business AstraZeneca (AZ) the hardest, according to the report by GlobalData.

A significant proportion of losses will come in the central nervous system (CNS) treatment sector, said the report, entitled PharmaLeaders: Global Pharmaceutical Market Benchmark Report.

Adam Dion, GlobalData’s analyst covering healthcare industry dynamics, said Otsuka—and its schizophrenia drug Abilify (aripiprazole)—could be the biggest victim of the patent cliff.

Earlier this month, LSIPR reported that some patent protection for the drug, which made 575.7 billion yen ($5 billion) in sales during the last financial year, was set to expire in April next year.

“Abilify’s upcoming US patent expiration in 2015 means the drug will lose a massive $6.2 billion by 2019 as the result of generic competition, making it the biggest victim of the pharmaceutical industry’s current patent cliff,” said Dion.

In a bid to ease the potential damage, Otsuka agreed a $3.5 billion deal to buy Avanir Pharmaceuticals to expand its drug portfolio.

Dion added that Eli Lilly and AZ had seen profits fall in the CNS therapeutics market.

GlobalData pointed to AZ’s patent loss on bipolar treatment Seroquel (quetiapine fumarate) and the subsequent market entry of generics Teva and Sandoz in 2012, and decreasing sales of Zyprexa (olanzapine), Eli Lilly’s drug used to treat schizophrenia and bipolar disorder, since 2011.

Jason Rutt, head of patents at law firm Rouse, said sometimes a big pharmaceutical company has done research & development (R&D) badly and faced an individual patent cliff, but that “this is not what we see here”.

“New drugs tend to treat smaller populations. They do so very effectively, but the smaller population size leads to much smaller revenues for the pharma industry. This generational change is giving rise to the patent cliff,” Rutt told LSIPR.

He added: “The patents I write now are likely to be for small biotech companies with an interesting approach to cancer, or a new diagnostic tool, whereas ten years ago I was writing and prosecuting patents for big cardiovascular and CNS indications.

“To manage this, the pharma companies have become marketing companies and experts in running phase III clinical trials, with large amounts of early R&D being done by small companies, which sell on successful projects later to big pharma.”

Otsuka, AZ and Eli Lilly did not immediately respond to a request for comment.